When digital media group Adobe (ADBE - Get Report) reports earnings for the second fiscal quarter of 2016 after the bell on Tuesday, investors will peer into data on the company's Creative Cloud suite of applications as well as slimmer offerings that play to photographers, students or other niches.
Wall Street expects CEO Shantanu Narayen to present investors with earnings of 68 cents per share in the second quarter, from $1.4 billion in sales
Ahead of the report, Adobe gained 58 cents, or nearly 0.6%, to $98.57.
Jim Cramer, TheStreet's founder and manager of the Action Alerts PLUS portfolio, which owns ADBE, cautioned that the company often presents numbers conservatively. The headline numbers may look better after investors "dig deep" into the report.
"Don't trade Adobe off the headline," he advised.
One factor that investors may have to dig into is Adobe's shift in emphasis from the number of subscribers to annualized recurring revenue, or ARR, Pacific Crest analyst Brendan Barnicle suggested in an earnings preview.
"While the change in reporting could cause confusion, the company has clearly communicated the change," he wrote.
During the first-quarter call in March, CFO Mark Garrett explained that the proliferation of new software plans at varying prices "further dilutes the relevance of the number of subscribers as a measure of the health of the business." Adobe is offering software packages tailored for photographers, students in kindergarten through high school and customers working on mobile devices.
Pacific Crest's Barnicle expects Adobe to meet second-quarter expectations. Wall Street consensus expectations for $1.47 billion in fiscal third-quarter revenue may be high, he cautioned, but forecasts of 71 cents in fiscal third-quarter earnings per share are more likely to be on target.
In the longer view, Evercore ISI analyst Kirk Materne named Adobe one of his top picks. Over the next three years, he forecasts 20% revenue gains and 30% earnings per share increases.
"On the quarter, continued strength in net new subscriber adds and ARR in the Digital Media business will remain important, in addition to seeing some Digital Marketing revenue acceleration to follow up the recent bookings strength," he wrote.
Aside from Adobe's numbers, CEO Narayen could have insights into the M&A market. Materne suggests that Adobe was likely the rival suitor for Demandware (DWRE) , which Salesforce.com (CRM - Get Report) is buying for $2.8 billion, as described in a June regulatory filing.